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The COVID-19 pandemic indisputably affected the way insurance companies conduct business, but it’s not the only factor behind the changes that the life insurance industry will need to grapple with within the next 10 years. The unprecedented spread of the disease has urged more traditional companies in the insurance industry to explore a life insurance innovation that can bring the digital revolution into their respective establishments. It’s good to note, though, that the life insurance industry is constantly adapting to meet the changing needs of its current market and the demands of the times. Here are four of the top factors that life insurance companies are keeping in mind as they plan their strategies over the next few years:
Crucial Factors In The Life Insurance Industry
Digital Native Clients
One of the strongest drivers for change in the life insurance agency is the generational shift in the insurance market. Millennials now make up the largest portion of the workforce in many countries such as the United States. Made up of digital natives and early adopters of digital technology, the people who belong to this generation expect their providers to offer digital services. Their standard for convenience and speed of service is different from that of the generation that preceded them, and life insurance companies need to account for these expectations if they want to maintain an edge over the rest of the competition.
To provide the level of service that the current generation requires of them and to reduce their dependence on face-to-face and paper-based transactions, many of the leading life insurance providers have fast-tracked their digitalization program. Using cloud computing has allowed life insurance companies to onboard new clients, offer modular life insurance packages, make their products and services more accessible, and process claims remotely and in real-time. Some of the most forward-looking life insurance companies have also incorporated the data they have collected from fitness apps and devices when designing life insurance packages.
If we look at any electrical machine, the engine requires electricity to operate. Exactly like that, the insurance industry needs enough funds to operate smoothly. As the pandemic has taken a huge toll on the world economy, the need to reduce expenses is also a primary reason for introducing and fast-tracking digitalization programs in many insurance companies. As more and more businesses adopt cloud computing services, it becomes clearer that sticking with a paper-based or a legacy processing system will simply prove to be more expensive and inefficient in the long run. Now that the rest of the world is seemingly starting to recover from the effects of the pandemic, many life insurance companies have set their sights on cutting costs and reallocating resources to critical investments that will accelerate innovation and recovery and spur future growth. These new priorities include increasing the role of automation in underwriting, making full use of advanced data analytics, enhancing cybersecurity, and using real-time monitoring, among others.
The pandemic has accelerated the widespread adoption of remote work setups, but remote workers have been around since personal computers have become available to everyday consumers. Many life insurance providers have adopted the current trend of working in hybrid environments and having flexible work schedules. But while this setup has allowed insurance companies to continue their operations while lockdowns are being observed in different parts of the world, it has also made them more vulnerable to security issues. After all, in the absence of heightened security measures and updated security policies, processing or viewing sensitive documents online or from a remote office can expose the insurance company to risk.
Managing security risks and complying with data privacy regulations are both pressing concerns for many insurance providers. As such, many companies have been bolstering their online security measures by implementing ‘zero-trust’ policies and adopting a ‘security by design’ mindset when developing in-house technologies or procuring services and products from third-party providers.
Insurance companies are anticipating changes in reporting requirements in the next few years with the scheduled implementation of the IFRS 17, an accounting standard that has a direct impact on insurance providers. At the same time, the cost of meeting the requirements of regulatory bodies will continue to rise unless insurance providers can find a way to make their reporting process more cost-effective. The good news is that there are many third-party solutions providers that provide insurance companies with modern tools and technologies. These have been shown to reduce the time and effort required to complete reports to regulators, so finding the right provider and software is key to bringing down the cost of compliance without compromising the quality of the report.
Anticipating Changes in the Life Insurance Industry During the Post-Pandemic Recovery
Time will tell if COVID-19 and its numerous strains will disappear completely or become as commonplace as flu and colds in the future. Still, both scenarios are something that life insurance providers should prepare for. Making the preparations now, including staying abreast of advancements and life insurance innovations and designing highly secure digital workspaces, is key to setting up a life insurance company’s success for the next few years.